The Great Depression

The Great Depression was a period from October 29, 1929 to around 1940, close to when the U.S. entered World War II. This period was an economic depression that was started by the Stock Market crash. Such a catastrophic time span has many different causes that can all relate and combine. The Great Depression had many underlying causes that started originated after World War I. A series of events, including the economic boom of the 1920’s were contributors to the Great Depression.

World War I came to an end in November of 1918, when the Treaty of Versailles was signed. This treaty ended the fighting and of many other results, it put the blame on Germany for the war. This resulted in Germany having to pay major reparation fee’s and put Germany in a financial hole. The treaty took away parts of Germany’s land and made it impossible for them to use their natural resources to profit from. The amount that Germany had to pay back was more then they could, and this started a chain reaction for the transfer of money. In 1924, The Dawes Plan was signed into action and the U.S. became a creditor nation. Germany owed around 32 billion in war reparations. They were unable to pay this, so the U.S. loaned Germany money, with that Germany paid European countries War Reparations, and with the reparation money they received, U.S exports were able to be bought. This benefited the U.S. because the loans would have to be paid back with interest, and it let the economy experience a boost because goods were able to be exported. The Dawes Plan boosted the American economy, while facilitating other European countries’ attempts to reestablish a stable financial state after World War One. This time period in the 1920’s is referred to as the вЂ?roaring twenties.’ “The nation's total realized income rose from $74.3 billion in 1923 to $89 billion in 1929” (Gusmorino). While this was a good thing at the time, it would lead to negative results later.

When the Dawes Plan of 1924 was signed into effect, America loaned out masses of capital to European countries; “$900 million in 1924, and $1.25 billion in 1927 and 1928” (Gusmorino). Ninety percent of the money loaned back went to buying American exports. This boosted the economy in the 1920’s. This boost quickly became one of the primary reasons for the Depression. During World War One, Europe had damaged its factories, and was unable to produce goods to match the quantity that was needed. America took advantage of this and became their producer. Along with exporting masses of goods to Germany, America also put high tariffs on imports to protect American business; “Starting with the Fordney-McCumber Act of 1922 and ending with the Hawley-Smoot Tariff of 1930, the United States increased many tariffs by 100% or more”(Gusmorino). While Europe needed these loans in the 1920’s they also needed the goods that they were producing to be bought by other countries. America retarded their income from exports and by doing so, started a chain reaction. With taxes so high on European imports in America their goods were not selling. This caused Europe to become unable to buy American goods any longer, and also unable to pay the interest on the loans that America gave them. This led to overproduction for many companies who were reliant on exporting their goods to Europe. It also led to banks losing money from the interest that was not able to be paid.

The nation’s distribution of wealth was far from even. The top .1 percent wealthy people owned an equal amount to the bottom forty-two percent, and owned thirty-four percent of all savings (Gusmorino). Those with incomes in the top one percent enjoyed an income increase of seventy-five percent from 1923 to 1929 (Gusmorino). In 1926, President Coolidge signed The Revenue Act of 1926, which made it possible for a income of a million dollars to pay two hundred thousand dollars in taxes, compared to six hundred thousand. This was not only the result of The Revenue Act of 1926, but other tax cuts during the 1920’s contributed. There was a great disparity between the rich and the poor in the 1920’s. The economy was great, but there was an underlying problem arising. The poor spent all their income on essential needs (food, clothes, etc.), and the rich also spent money on these essentials, but what they needed. They had much more money to save, or invest. Not only was the wealth distribution unequal for the people, but businesses were not all on the same plane. The automobile industry and radio industries were thriving, while agriculture’s earnings were steadily decreasing. The top two hundred companies were earning half of all corporate income. “In 1921, the same year that Ford Motor Company reported record assets of more than $345 million, farm prices plummeted, and the price of food fell nearly 72% due to a huge surplus. While the average per capita income in 1929 was $750 a year for all Americans, the average annual income for someone working in agriculture was only $273 (Gusmorino).

Technology was increasing greatly in the 1920’s with the automobile becoming more and more common for households. Tractors were growing in common for farmers. Machines in factories were being invented to be able to make more in less time. Tractors were great for farmers, as they could